Debt

Short-term borrowings outstanding and the current portion of long-term debt and capital lease obligations at June 30, 2018 and September 30, 2017 are summarized below:



	June 30, 2018		September 30, 2017
Short-term borrowings	$	37.7	$	40.8
Current portion of long-term debt and capital lease obligations	9.8		10.3
Total short-term borrowings and current portion of long-term debt and capital lease obligations, net	$	47.5	$	51.1

Long-term debt outstanding at June 30, 2018 and September 30, 2017 is summarized below:



	June 30, 2018			September 30, 2017
ABL Facility	$	157.4		$	139.3
Term Loan Facility	642.0			646.9
Capital lease obligations ⁽¹⁾	34.9			37.5
Total long-term debt	834.3			823.7
Less: unamortized debt discount ⁽²⁾	(2.4		)	(2.7		)
Less: debt issuance costs ⁽³⁾	(15.4		)	(16.7		)
Less: current portion of long-term debt and capital lease obligations	(9.8		)	(10.3		)
Long-term debt and capital lease obligations, less current portion, net	$	806.7		$	794.0


⁽¹⁾	Capital lease obligations exclude executory costs and interest payments associated with the underlying leases. See “Capital Lease Obligations” below.


⁽²⁾	The unamortized debt discount is related to the Term Loan Facility and amortized to interest expense over the life of the instrument using the effective interest rate method.


⁽³⁾	See discussion below under Term Loan Facility and Debt Issuance Cost Amortization.

Short-Term Borrowings

The Company’s short-term borrowings are associated with the Company’s operations in China and are summarized below:



	Facility Limit		Outstanding Borrowings Balance		Weighted Average Interest Rate on Borrowings		Outstanding LOC and Bankers’ Acceptance Bills		Remaining Availability
June 30, 2018
Bank of America - China ⁽¹⁾	$	24.3	$	23.0	4.4	%	$	—	$	1.3
Bank of Communications - China ⁽²⁾	22.7		14.7		5.4	%	6.5		1.5
Total	$	47.0	$	37.7			$	6.5	$	2.8
September 30, 2017
Bank of America - China ⁽¹⁾	$	24.3	$	23.8	4.3	%	$	—	$	0.5
Bank of Communications - China ⁽²⁾	22.5		17.0		5.3	%	5.3		0.2
Total	$	46.8	$	40.8			$	5.3	$	0.7

⁽¹⁾

The borrowing limit of this facility is denominated in USD. This line of credit is secured by a standby letter of credit drawn on the ABL Facility covering at least 110% of the facility’s borrowing limit amount. Borrowings under the line of credit are payable in full within 12 months of the date of the advance. The Company has the ability to provide additional capacity under these lines of credit, if needed.


⁽²⁾	The borrowing limit of this facility is denominated in RMB. This line of credit is secured by a standby letter of credit drawn on the ABL Facility covering at least 100% of the facility’s borrowing limit amount. Borrowings under the line of credit are payable in full within 12 months of the date of the advance.

Long-Term Debt

ABL Facility

The ABL Facility provides for committed revolving credit financing including a U.S. Tranche of up to $505.0 million, a Canadian Tranche of up to the USD equivalent of $40.0 million and a FILO Tranche up to $30.0 million. Provided no default or event of default, the ABL Borrowers have the option to request that the ABL Facility be increased by an aggregate amount, when included with any incremental borrowings issued under the Term Loan Facility, not to exceed $175.0 million.

The weighted average interest rate on borrowings under the ABL Facility was 3.68% at June 30, 2018. The Company had the USD equivalent of $72.9 million in outstanding letters of credit under the ABL Facility at June 30, 2018. The collective credit availability under the U.S. and Canadian Tranches of the ABL Facility was the U.S. equivalent of $300.5 million at June 30, 2018. There was $5.0 million availability under the FILO Tranche at June 30, 2018. The ABL Facility matures on June 9, 2021.

Obligations under the ABL Facility are secured by a first priority lien on all ABL Facility first lien collateral, including eligible inventory and accounts receivable of the ABL Borrowers, and a second priority lien on all Term Loan Facility first lien collateral including outstanding equity interests of the Borrower and certain of the other subsidiaries of Holdings, in each case, subject to certain limitations; provided, that no ABL Facility first lien collateral or Term Loan Facility first lien collateral owned by the Canadian Borrower secure the obligations owing under the U.S. tranche of the ABL Facility. These accounts receivable and inventory totaled $722.9 million in the aggregate as of June 30, 2018.

As of June 30, 2018, the ABL Borrowers were in compliance with the covenants of the ABL Facility.

Term Loan Facility

The Term Loan Facility provides secured debt financing in an aggregate principal amount of up to $655.0 million and the right, at the Company’s option, to request additional tranches of term loans in an aggregate principal amount, when included with any incremental borrowings issued under the ABL Facility, of up to $175.0 million, plus unlimited additional amounts such that the aggregate principal amount of indebtedness outstanding at the time of incurrence does not cause the Secured Net Leverage Ratio, calculated on a pro forma basis, to exceed 4.1 to 1.0. Availability of such additional tranches of term loans is subject to the absence of any default and, among other things, the receipt of commitments by existing or additional financial institutions.

On December 19, 2017, the Company completed TLB Amendment No. 2 amending the Term Loan Facility. TLB Amendment No. 2 reduced the interest rate margin applicable to outstanding term loans by 50 basis points from 3.75% to 3.25% for LIBOR loans and from 2.75% to 2.25% for base rate loans. TLB Amendment No. 2 also provides for a soft call premium equal to 1% of the amount of the term loans that are subject to certain repricing transactions occurring on or prior to twelve months from the effective date of TLB Amendment No. 2. As a result of TLB Amendment No. 2, the Company paid debt issuance costs of $0.8 million, which will be amortized throughout the remaining life of the Term Loan Facility.

The Company is required to make scheduled quarterly payments in an aggregate annual amount equal to 1.0% of the aggregate principal amount of the outstanding term loans as of the Closing Date of the TLB Amendment No. 2, with the balance due at maturity. The weighted average interest rate for the Term Loan Facility was 5.44% at June 30, 2018. The Company amortized $0.1 million and $0.3 million of debt discount to interest expense during the three and nine months ended June 30, 2018, respectively and $0.1 million and $0.4 million of debt discount to interest expense during the three and nine months ended June 30, 2017, respectively. The Term Loan Facility matures on June 9, 2023.

Additionally, the Term Loan Facility requires the Company to make mandatory principal payments on an annual basis, commencing with the fiscal year ending September 30, 2017, if cash flows for the year, as defined in the Term Loan Facility, exceed certain levels specified in the Term Loan Facility. The Company was not required to make such mandatory principal payment for the fiscal year ended September 30, 2017. The Company generally has the right to prepay loans in whole or in part, without incurring any penalties for early payment.

Obligations under the Term Loan Facility are secured by a first priority lien on all Term Loan Facility first lien collateral, including outstanding equity interests of the Borrower and certain of the other subsidiaries of Holdings, and a second priority lien on all ABL Facility first lien collateral, including accounts receivable and inventory of the loan parties under the Term Loan Facility, subject to certain limitations.

As of June 30, 2018, the Company was in compliance with the covenants of the Term Loan Facility.

Debt Issuance Cost Amortization

Amortization expense included in interest expense related to debt issuance costs of the Term Loan Facility was $0.7 million and $2.1 million for the three and nine months ended June 30, 2018, respectively, and $0.7 million and $1.8 million for the three and nine months ended June 30, 2017, respectively.

Capital Lease Obligations

The capital lease obligation balance of $34.9 million as of June 30, 2018 is primarily associated with the Ryder Lease and the Montgomery Lease. The Ryder Lease obligation excludes decreasing annual interest payments ranging from $0.9 million to less than $0.1 million, for aggregate interest payments totaling $3.0 million. The Montgomery Lease obligation excludes decreasing annual interest payments ranging from $1.0 million to $0.1 million, for aggregate interest payments of $12.9 million.